ALASKA LNG: HOW THE STATE BECOME A PARTNER
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STATE OF ALASKA'S ROLE IN SPOTLIGHT FOR YEARS
state investing in and owning a 25% share of the project through the state’s Alaska Gas Development Project came about. Owning part of the pipeline did not hap- pen when the Trans Alaska Pipeline System was built in the 1970s to ship North Slope oil. Though the years many Alaskans have regret- ted that the state didn’t have a stake in TAPS. The three major producers built, and own the oil pipeline. They now ship the state’s royalty oil share, earning profits from that. As the TAPS project was being organized in the early 1970s, there were ideas of the state owning a share, however. Then-Gov. Bill Egan wanted the state to own the entire project but the Legislature rejected the idea. The idea of even part ownership in TAPS never advanced. Interestingly, years later BP offered to sell its share of TAPS to the state on advantageous terms, but former Gov. Jay Hammond was cool to the initiative, so it did not happen. Years later, when ideas for the gas pipeline were advanced, the state was more open to becoming a partner. However, being a part- ner brought responsibilities because the state would pay its proportional share of costs, and its share of risks like cost overruns, but part- nership also brought advantages because the state would be “at the table,” with the other owners and participating in decisions to en- sure maximum local benefits. This could include making gas available to communities and ensuring Alaska work- ers and businesses are hired for work for the project. Alaska-hire, Alaska-buy and terms for gas supplied to Alaska utilities are now a part of the Alaska LNG project. Over the years, there were various pro- posals for how the gas project would be structured. Gov. Frank Murkowski pro- posed the state taking its royalty and tax share of gas and investing in the project in 2005. Two years later, Sarah Palin, then gov- ernor, proposed bringing in an independent pipeline company to develop the project. This was TransCanada. TransCanada’s proj- ect did not advance and the major the pro- ducers returned to promoting the project, but this time with the state as 25% partner. The producers withdrew in 2016, en- couraging the state to continue work. Gov. Bill Walker, in taking office, did that and found Chinese companies as potential part- ners. In 2018 newly-elected Gov. Mike Dun- leavy told AGDC, the state gas corporation, to find a new private investor, which was Glenfarne.
The idea of the state becoming a formal partner had its inception years ago when the produc- ers, then BP, ConocoPhillips and ExxonMobil, and then-Gov. Frank Murkowski felt it would be advantageous to have the state formally in- volved in a North Slope gas pipeline.
State’s 25% share of the project is proposed through the AGDC BY TIM BRADNER AS THE EFFORT TO GET A NORTH SLOPE GAS PROJECT ENTERS A NEW PHASE, THERE’S A QUESTION PEOPLE OFTEN ASK: HOW AND WHY DID STATE GET INVOLVED AS A PART OWN- ER OF THE PROJECT? The idea of the state becoming a formal partner had its inception years ago when the producers, then BP, ConocoPhillips and ExxonMobil, and then-Gov. Frank Murkowski felt it would be advantageous to have the state formally involved in a North Slope gas pipeline. The state is a major owner of natural gas on the North Slope through its royal- ty share of the gas. In purely commercial terms, if the state has a gas ownership share it is advantaged by shipping royal- ty its own gas through the pipeline and selling it rather than having the producers pay the royalty “in value,” or in cash, and taking on the responsibility of transport- ing and marketing the gas. By taking its gas “in kind,” state would earn revenues as a gas producer and mar- keting the gas itself. If the state owned a part of the pipeline equal to its share of gas ownership it would transport its gas through its share of the pipeline and earn revenues rather than paying other pipe- line owners, such as the producers, to transport the state’s gas. This would create a commercial align- ment among the gas owners, including the state. Revenues were maximized for each of the resource owners proportion- al to their shares of gas production. This worked out to roughly a three-quarter share of gas production, and pipeline own- ership, for the producers and a one-quar- ter share the state. This set the stage for the
Alaska's gas quest: A half-century of big ideas seeking a big solution
through it.
For more than half a century, Alaska has tried to answer a different and deceptively simple question: How do you get enormous quantities of natural gas from the North Slope to a market? The discovery of Prudhoe Bay in 1968 transformed Alaska's economic future, but it also created an unusual problem. The North Slope contained enormous quantities of natural gas associated with the oil production, yet the gas was stranded hundreds of miles from the state's population centers and thousands of miles from the Lower 48 and Asian energy markets. Oil had an obvious transportation solution. The Trans-Alaska Pipeline System would carry crude from Prudhoe Bay to Valdez, where tankers could take it to refineries. Natural gas was different. Moving it required either a massive pipeline, con- version into another product, liquefaction, or some technology that, at the time, existed more comfort- ably on the drawing board than in the Arctic. The result was one of the longest-running infrastructure searches in Alaska history. Thinking outside the pipeline The pipeline was never the only idea. Some of the proposals sound almost futuristic today. One concept envisioned submarine tankers carrying hydrocarbons beneath the Arctic ice, eliminating the need to construct an overland pipeline across hundreds of miles of difficult terrain. The idea was not merely science fiction. By the early 1980s, researchers had developed detailed designs for commercial submarine tankers, including a proposed 140,000-cubic-meter LNG submarine. The studies concluded that submarines could technically transport Arctic hydrocarbons beneath the ice and envisioned submerged loading facili- ties and surface unloading at the destination. The concept took advantage of something conventional ships could not: the ability to travel beneath seasonal Arctic ice rather than fight
Another idea looked up. In 1973, a study involving Purvin & Lee, Boeing, Air Products and Chemical and Transworld Gas Systems examined the possibility of using modified Boeing 747 aircraft to transport LNG from the North Slope. Under the concept, LNG would be produced on the Slope, loaded aboard specially modified aircraft and flown south to a tidewater facility. There, it could be trans- ferred to LNG tankers for delivery to customers. The study concluded the system was economically feasible under assumptions of the time. It was an extraordinary proposition: instead of building hundreds of miles of large-diameter pipe across Alaska, put the gas into liquid form and fly it out. The concept also illustrates how different the technological landscape looked in the early 1970s. The Boeing 747 was still a relatively new aircraft, having entered commercial service only a few years earlier. The possibility of using a giant wide-body aircraft as part of an energy transpor- tation system was being considered at essentially the same time the conventional pipeline solution was being debated. Turning gas into something easier to ship Another strategy was to avoid shipping natural gas at all. If the gas could not economically be transported to consumers, perhaps it could be converted into products that could. That thinking eventually led to one of the more ambitious alternatives: a large-scale petrochemi- cal industry based on North Slope gas. A consortium led by Dow Chemical and Shell Chemical undertook a major feasibility study. By 1981, the Dow-Shell Group had completed a 10-volume, $5.5 million study examining whether Alaska could support a world-scale petrochemical industry. The study concluded that such an industry could potentially be economically feasible, although a number of conditions would have to be met.
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ALASKA RESOURCE REVIEW SEPTEMBER 2026
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